Critics who think mortgage funding giants Fannie Mae and Freddie Mac have it too easy because of their special relationship with the government might want to take look a look at the company called SLM Corp.
The Reston-based company, which is better known as Sallie Mae and makes billions of dollars in student loans every year, was founded with a government charter, much like the charters held by the big mortgage finance companies. But in the late 1990s Sallie Mae agreed to give up its charter and strike out on its own as a fully private company.
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One-Stop Lending Shop SLM Corp., parent company of Sallie Mae, has branched out from its origins as a government-sponsored enterprise that bought and sold student loans. Now, Sallie Mae lends money directly to borrowers, collects bad debts and engages in a variety of related businesses.
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Metro Business: Coverage of Washington area businesses and the local economy.
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The result has been a bigger, more profitable, more dominant company than existed or was even possible when it operated with its federal ties in place.
Profits at the company have soared -- from $384 million in 2001 to $792 million in 2002, and to $1.3 billion last year. The company's stock price has climbed from less than $20 a share in early 2001 to more than $50 last week. Its quarterly stock dividend has jumped from less than 6 cents a share to 19 cents in that period, and the stock split three-for-one last year.
Chief executive Albert L. Lord, the architect of Sallie's Mae's success, has also done well. He received $41.8 million in total compensation, including stock options exercised, last year. President Thomas J. Fitzpatrick received $27.8 million. The two ranked second and fourth, respectively, in total compensation in a Washington Post survey of executive compensation in the region.
"Sallie Mae is the Frankenstein that federal law created and let loose on the marketplace," said Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers and a longtime critic of the company.
Sallie Mae, which has more than 600 employees in the Washington area and more than 7,000 nationwide, has moved strongly into fields only tangentially related to student loans, including a small mortgage-banking subsidiary. But its fundamental business makes it important to millions of American families.
The cost of college has been rising faster than most people's incomes. Tuition and fees rose 47 percent after inflation at four-year public colleges and 44 percent at private colleges over the past 10 years, according to the College Board.
The result is rapidly rising debt as families, unwilling to deny children as big a leg up as they can get, borrow to pay what their resources and scholarships do not cover.
Those rising needs, and an increasing number of young people seeking to go to college, have spurred Sallie Mae's growth.
